Total health care spending in Minnesota rose to $36 billion in 2009

Without Minnesota health reforms enacted in 2008, health care spending would more than double in 10 years to $78 billion, consuming about 19 percent of the economy

Total health care spending in Minnesota rose to $36 billion in 2009, but the rate of growth fell to its lowest level in more than a decade, according to a new report by the Health Economics Program at the Minnesota Department of Health (MDH). The recession caused the slower rate of growth as Minnesotans lost coverage and opted to use less health care.

The report looks at health care spending from all sources, including state public programs, Medicare, private health insurance and out-of-pocket expenses.

In addition to analyzing 2009 spending, the report projects that health care spending in the state would more than double in the next decade without full implementation of Minnesota's health reform law, which took effect in 2008.

Health care spending grew 3.8 percent from 2008, which is the slowest growth observed since 1997. Despite the slower growth rate in 2009, health care spending growth is expected to continue at an average annual rate of 7.6 percent in Minnesota from 2009 to 2019 as the economic recovery gains momentum and Minnesotans return to previous levels of coverage and health care utilization.

Minnesota continues to spend less on health care per person than the country as a whole. In 2009, per person spending in Minnesota was $6,913, compared to $7,590 nationally. Health care spending in Minnesota also accounts for a smaller share of the economy than nationally (14.1 percent compared to 16.5 percent). Because the economy shrank in 2009 at the same time that health care spending continued to grow, the share of the economy spent on health care experienced the single largest annual increase in both Minnesota and the U.S.

The report is part of the state's health reform law enacted in 2008, which aims to significantly slow the growth of health care spending. The law includes provisions such as provider peer grouping, which offers information to consumers to help them choose high-quality, low-cost providers, and health care homes, which encourage care coordination for Minnesotans with chronic or complex conditions. The law also makes investments in public health, to help reduce tobacco use and obesity in Minnesota.

"Health care spending makes up an ever-increasing share of our economic resources in Minnesota, and we have to find a way to restrain that cost growth," said Dr. Edward Ehlinger, Minnesota Commissioner of Health. "One important way to do that is to invest upstream, to make fundamental, long-lasting changes that improve health and help prevent Minnesotans from being pulled into the health care system in the first place."

The severe economic downturn and slow recovery affected 2009 health care spending in Minnesota in important ways. Private spending accounted for a smaller share of total spending as individuals used less health care.

"There is evidence that during the recession Minnesotans reduced their use of elective and even routine care, a trend that mirrors national patterns in 2009," said Stefan Gildemeister, assistant director of the Health Economics Program. "Several factors contribute to this change, such as the loss of private coverage, the expectation to pay more in premiums or out-of-pocket costs and declines in income in 2009."

At the same time, the report shows that public spending rose in part because the recession caused more people to enroll in public health insurance programs.

The report also compares projected spending and estimated actual spending to determine the level of savings over time as Minnesota implements its 2008 health reforms. The comparison of actual to projected spending did not yield savings for 2009, primarily because many of the provisions of Minnesota's health reforms had not fully taken place.